2017 Interim Results
By LOM | July 31, 2017
To our Shareholders:
The first half of 2017 has been a year of expansion for your Company. We have purchased an office building in the Bahamas to house our Bahamas subsidiary. The new building, LOM House, is located at 3 Pineapple Grove, just outside the entrance to Lyford Cay in Nassau. We intend to take on two additional producers in that office, one to cover the Latin market, and another, an ex-RBC Dominion employee, to cover the southern Caribbean.
LOM Financial (Bermuda) Limited, our securities brokerage subsidiary in Bermuda, has established a branch office in Grand Cayman with offices at 39 Market Street, Camana Bay and will be doing business as LOM Financial (Cayman). Our Cayman office has been joined by two very well respected and senior financial advisors who are already based in Cayman. We are very pleased that they are both leaving large financial institutions in that jurisdiction to join LOM.
The expansion of our overseas offices is going to raise the group’s costs and in the short term put pressure on our profitability, however we have high expectations that both operations will be earnings accretive within the next two years.
LOM has continued to see inflows of new assets into its brokerage divisions and our asset management subsidiary. Asset management revenue has continued to grow well year-on-year and all of LOM’s Asset Management funds continued to perform very well, outperforming both their benchmarks and their peer groups. Also, very pleasingly for us, after several years of sharp declines, we have seen a rebound in our brokerage revenues.
LOM made a profit of $432,935 in the first half of 2017 as compared to a profit of $51,534 for the same period in 2016. Overall we remain cautiously optimistic for the remainder of the year. Though we are continuing to win new assets, we will see an increase in costs in the second half of the year that will be a short term drag on profits.
Revenues overall rose 34% and had the following year-on-year changes:
- Management and advisory fee revenues rose 27% to $1.95 million (41% of revenues).
- Broking fee income rose 84% to $1,460,505 (31% of revenues).
- Fees from corporate finance work fell 3% to $17,500 (0.3% of revenues).
- Foreign Exchange Income rose 4% to $170, 986 (3.6% of revenues).
- Net Interest Income rose 2% to $484,537 (10% of revenues).
- Other Income rose 15% to $523,444 (11% of revenues)
- Gain on securities held in inventory was $46,648
Costs for the group rose 24% and had the following year-on-year changes:
- Total operating expenses, ex commission payments, rose 15.4%
- Employee compensation expenses rose 10.6%.
On other financial measures:
- LOM’s assets under administration were $796 million as of 30th June 2017 as compared to $686 million in assets at December 31st 2016.
- LOM is in a strong financial position with net equity of $17.5 million and no debt.
- LOM holds cash and equivalents of $2.66 million, representing 15% of net equity.
The Board of Directors of LOM has decided that as earnings have increased, we are going to pay a modest annual dividend of 1 cent per share to shareholders of record 10th August to be paid on the 17th August. We understand that the shareholders have not received any dividends for some years and thank them for their patience.
The Board has given approval for LOM to continue to buy back shares for cancellation for a total not to exceed 200,000 shares. Over the first half of 2017, the Company purchased for cancellation 2,000 shares at an average price of $2.50. As at 30th June 2017 the Company had 5,994,878 shares issued and outstanding.
Our current share price on the Bermuda Stock Exchange is $2.55 and our current market capitalization is $15.29 million. As of 30th June 2017 LOM’s book value was $2.92 per share.
Scott Lines, CEO